MV Weather Report: A Second Spring for the Tech Sector?

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The story of the day was Intel (INTC): The company reported better than expected numbers and raised guidance for next quarter. CEO Paul Otellini said the company is building up inventory in anticipation of a stronger second half of the year. Intel's view certainly confirms the green-shoots theory.

Intel's positive quarter lifted the NASDAQ by 3.51% and the big beta giants followed: Apple (AAPL), Amazon (AMZN), and Research in Motion (RIMM), along with other PC-related stocks like AMD (AMD), Nvidia (NVDA), Marvell (MRVL), and LSI Corporation (LSI).

You can make the argument that Intel, along with Microsoft (MSFT), IBM (IBM), and Cisco (CSCO) are the 3 most important tech stocks. Think of them as wise grandparents to the tech sector. They're no longer growth companies; instead, these are mature blue chips that move in cycles.

The reason for Intel's bullish second half is the possibility of a new tech upgrade cycle. Today on the Buzz and Banter, Professor Adam Katz dissected this possibility:

"Mr. Practical's article regarding Intel seems like the very Wall Street-ish view to me. You have two things that positively impacted the quarter. One was a historic drop in inventory levels that needed to be replenished, and 2. the demand in China.

"But what no one is talking about with respect to that demand is that unlike the U.S. Stimulus package, China's is directly consumption related. A very smart friend of mine pointed out that as a major part of China's stimulus plan, they provided vouchers to citizens that they could spend on anything they wanted, but they could not deposit it into a bank.

The electronics companies were particularly aggressive in providing incentives to court those vouchers and hence, we got a sugar rush out of China. I do not consider that to be long lasting. But looking a little further out, Microsoft's (MSFT) Windows 7 is getting great reviews and should start driving hardware refresh cycle in"

Tomorrow, we'll get more evidence as to whether or not a tech spending cycle is underway when Google (GOOG) and IBM report earnings after the bell. The current consensus for Google is EPS of $5.08 on revenues of $4.06 billion. IBM's estimates are for EPS of $2.02 on revenues of $23.59 billion.

Also before the bell traders will be watching for econ data: Initial jobless claims numbers, net-long-term TIC flows, and the Philadelphia Fed. JPMorgan (JPM) will also post results before the market opens. The expectations are for a blowout quarter a la Goldman Sachs (GS). But, the question with JPMorgan is: What kind of quarter is already baked in?

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